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The insolvency rate in Canada is slowly beginning to creep upward in parts of the country as the fallout of lower oil prices hits the economy, a new report from CIBC World Markets Inc. shows.

The number of insolvencies rose by 1.2 per cent during the six months ending February, 2015, the first increase since the 2008 recession, Benjamin Tal, deputy chief economist of CIBC World Markets Inc., wrote in the report released Tuesday.

An insolvency filing is the first step to either filing for bankruptcy or making a consumer proposal, where the debtor negotiates with creditors to pay back a portion of what is owed.

The number of personal bankruptcies fell by 4.7 per cent during the six month period, according to the data from the Office of the Superintendent of Bankruptcy.

But the number of consumer proposals shot up by 9 per cent.

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“The damage from lower oil prices is starting to show,” Tal wrote in the report.

The total number of insolvencies in Manitoba and Saskatchewan rose by almost 11 per cent during the six-month period, while in Alberta it rose by 6.5 per cent — the worst showing since the recession, Tal wrote.

“At the same time, the number of insolvencies in Ontario fell by almost 7 per cent, while in British Columbia they were little changed,” the report said.

It’s important to keep in mind that overall, the insolvency rate in Canada is very low, Tal said in an interview.

“We are talking about a very low base. The numbers are not in the sky by any stretch. Given the amount of debt people have, it’s actually surprising how low bankruptcies and delinquencies are,” Tal said.

“But we are looking at the trend and seeing that there is an increase despite the fact that interest rates are still very low.”

During the recession, approximately 6 in 1,000 adults filed for insolvency. That rate has since fallen back to 4 in 1,000.

Delinquency rates continue to decline for credit cards, but are rising on lines of credit.

The figures from the Office of the Superintendent of Bankruptcy show that only one-third of insolvent debtors are unemployed.

“Other factors, such as employment quality play an important role here,” Tal wrote.

More than 60 per cent of insolvents are classified as being in unskilled or semi-skilled jobs.

Another 20 per cent say they operated a business within five years of becoming insolvent. “More than half of insolvencies occur due to the combination of overextension of credit, financial mismanagement and unexpected expenses,” Tal wrote.

With prices for crude oil trading at about half of last year’s peak, the Bank of Canada, economists, and other observers are watching very carefully for signs of strain in the economy.

Household debt levels, in particular, are a source of concern. On average, Canadian households owe just over $1.63 for every dollar of disposable income.

The unemployment rate held steady at 6.8 per cent in April for the third month in a row. But there are worries that the lower Canadian dollar is not yet giving the country’s manufacturing and export sector enough of a boost to compensate for lost jobs in the oil sands.

Most economists expect the Bank of Canada to keep its key overnight interest rate unchanged until well into 2016.

More than 60 per cent of insolvents are classified as being in unskilled or semi-skilled jobs.

Another 20 per cent say they operated a business within five years of becoming insolvent. “More than half of insolvencies occur due to the combination of overextension of credit, financial mismanagement and unexpected expenses,” Tal wrote.

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